oh, okay. qualcome, it's nice to see some technology stocks go up. go up, won't last. qualcomm is the exception, not the rule. i like to say there's always a bull market somewhere, i promise to try to find it four right here on "mad money." i'm jim cramer, and i'll see you tomorrow! hey, larry, what are you looking at tonight? >> all right, jimmy, the markets sent thumbs down on last night's election, but it may be way overreacting. good evening, everyone. i'm larry kudlow. this is "the kudlow report." it took $2 billion and a year, but barack obama is re-elected president of the united states. now, hold off on the wednesday morning quarterbacking, at least for now. putting differences aside, i congratulate the president on his victory. america is a great country. problems can be solved. you'll hear my take later in the broadcast. life goes on. the show must go on. and so shall we. first order of business tonight is breaking news. moments ago house speaker john

boehner, he delivered a direct message. this is your moment, mr. president. and we want you to succeed. the fiscal cliff is priority number one. boehner is now opening the door to a grand design fiscal deal that could include tax and entitlement reform. listen to the speaker today. all right. so we didn't get quite that sound. sorry. maybe we'll pick it up later. what happens to the market? courtney reagan at the real-time exchange breaking it down for us. good evening to you, courtney. >> good evening, larry. last night might have been overwhelmingly blue but today it was all red. the day after the presidential election saw the dow shift 312 points, marking the biggest point loss so far this year for the index. but it could have been worse. at session lows the dow was actually off by 369 points. the sell-off was broadbased and multifaceted. some point to wall street's disappointment with president obama's re-election. but ecb head mario draggi's

comments about weakness in europe affecting germany and apple's move into correction territory certainly didn't help things either. now, financials selling off as the market anticipates. another obama term could mean financial regulation is here to stay. coal stocks the hardest hit in the wake of romney's loss. we know he was a supporter. and while not all health care names performed well, hospital stocks did soar today, with obama care set to remain in place money will continue to flow to the hospitals. as you can see, your tenet healthcare up almost 10%. larry? >> all right. many thanks. cnbc's courtney reagan. let's turn now to our investors, break down today's huge market sell-off. joining me is henry blodgett, business insider, co-founder ceo and editor in chief. and david goldman is a former head of fixed income research at bank of america, currently president of macro strategy. and jim lacamp, senior vp of investments at ubs. i begin with mr. la camp, is

this a wall street vote on the election? awful a sudden boom, boom, boom. is that what this is all about or is there something else going on here? >> there's definitely something else going on. we had problems before, with this market before yesterday. since september this market has been struggling with a falling, deteriorating global economy. it's been struggling with deteriorating earnings from corporate america and the fiscal cliff. so if you look at what the market did today it's all the obama themes that dominated the activity. the banks, the coal, the health care stocks, defense stocks got killed. and so you cannot say that this market today had nothing to do with obama's re-election, but you can say this market already had some issues and these issues are going to continue for some period of time. >> all right. henry blodget, you're our obama man. and by the way, i don't want to make any conclusions because i think sometimes, henry, people on wall street kind of jump to conclusions. there may be deals. who knows what's going to happen? but i do want to ask you, as you saw this thing collapse today, i know there was some talk about europe and maybe germany's

economy. but there's nothing new about that. do you think this was a political reaction in the market to last night's election? >> i think it's a combination of things. i think that's certainly part of it. i think you're probably not going to get as good a deal on capital gains taxes and so forth. people are looking to take advantage of that. so that factors into it. but i have to say as you mentioned earlier, first of all, the olive branch that you are extending and the olive branch that boehner is extending is actually a tremendously good sign for this country. we're still going to go through a period i think early next year where taxes go up a little bit and spending comes down and that's going to put a little pressure on the economy, but we need a long-term deal and the only way to get to it is compromise, and the fact that that seems to be happening is great. >> let me follow up, henry, on just that very point. because okay, i do fret that the capital gains tax rising is going to have a negative effect on the stock market. i do fret about that. but boehner was out there this afternoon making a very conciliatory speech. he has apparently spoken to the president. they know the fiscal cliff is

out there. they know there's a recession beyond the fiscal cliff. so henry, is it possible that investors are just jumping to worst case conclusions a little bit too soon? i mean, even i want to see what's going to happen. i do not want to prejudge this process because i think things got shaken up last night. >> i think it's likely that capital gains taxes are going to go up a bit. not punitively but a bit. and so the fact that investors are taking advantage of that, selling now and forth, makes perfect sense. i agree with you on that. but again, i think the really critical thing here is that you already have the republicans saying, okay, we will come to the table. that did not happen in the first term and it's why we have just done nothing with the huge debt and economic crisis we've got in front of us. >> or, david goldman, is part of the market's message today that it just doesn't have any of the confidence that i may have or henry blodget may have and it's just saying we are going to have anemic, stagnant economic growth with too many regulations and

too many taxes? could that be part of it? >> larry, i'm very negative on this. i think the profile of the market today is mainly regulatory driven, not fiscal cliff driven. the coals got crushed the most. then came the financials with dodd frank coming up. then the defense as jim just mentioned. it's interesting that consumer discretionary was one of the big outperformers, which you wouldn't expect if the fiscal cliff was the decisive issue. we're in a different economy than we were five years ago. the entrepreneurial sector is dead in the water. venture capital doesn't exist. we have sclerotic monopolies run by their legal departments masquerading as tech companies with no growth prospects -- >> why can't venture capital exist? tell me why new business start-ups can't come back. they're so vital to our economy. >> the regulatory burden for start-ups is so onerous. in a global economy american

firms have such a high threshold to crawlover that the start-ups are getting killed. and in fact smaller firms throughout the economy are underperforming vastly. that's the result of obama's regulatory-driven crony capitalism, which leaves us with a handful of very profitable companies whose prochts are fraying at the edges. >> it's also fed policy who's given money to big businesses and big banks and has not made the capital available to the smaller banks and smaller businesses that need that capital to grow their businesses. >> jim, i agree with you. and with an earnings yield of 7% on the s&p i think you're in much better shape to buy preferreds earning a steady 6% than owning the s&p right now. >> henry blodget, what about technology? henry blodget, what about technology stocks? they've been star performers. not every one of them, but tech has been the great entrepreneurial area. >> huge respect for david. i agree with jim completely on the tax breaks, the free banks,

free money and so forth. but in technology at least venture capital is alive and well. a tremendously healthy ecosystem. the big companies have cash coming out of their ears. the reason they're not deploying it has nothing to do with regulation in technology. it has to do with the fact that consumers are broke. and we need to start stimulating that. >> consumption has gone up much faster than investment. that's simply wrong, henry. look at the numbers. the fact is that the volatility of the so-called tech sector, which used to be three times that of the index when they were aggressive entrepreneurial compani companies, is now flat to the index. we don't have tech sector in the s&p. what we have is mature consumer businesss who operate like quasi-monopolies -- >> but jim lacamp -- >> sitting in tech is just waiting for apple to turn into sony. >> jim lacamp, i know you sound very pessimistic but a lot of times down through the years you're buying. and i want no know what you're buying because i know you're getting ready to buy this correction. what are you going to buy?

>> i am going to buy, larry, but i'm not going to buy yet. we've seen some damage in the markets and i don't think these things are going to be fixed quickly. congress is only going to meet four days before thanksgiving, and they have to elect their leaders and they have other vacations involved. some people aren't even coming back. so they aren't going to have an incentive. i don't think this thing's going to get fixed quickly. now, what i will buy when the market corrects properly and a more substantial correction takes place is names like apple computer but also commodity-driven names. i think we're going to see a lot more money printing here and around the world. that's going to be bullish on commodity. so commodity-related themes. >> gentlemen, thanks very much. appreciate it. coming up on kudlow, house speaker john boehner makes the first move in the post-election chess board. he's calling for compromise in the fight over the fiscal cliff. here's the sound bite we wanted to show you earlier. >> we want you to succeed. let's challenge ourselves to find the common ground that has eluded us. let's rise above the dysfunction

and do the right thing together for our country. >> all right. immediately, the day after the election, this is very big news. and we're going to talk to some congressional members who will help us understand what mr. boehner is going to do. later on in the show, california's prop 30 passes to raise taxes on the wealthy. really? do they never learn that this will only backfire? former san francisco mayor willie brown is up next. i just want to know why we have to kill the california economy. because free market capitalism is always the best path to prosperity. i'm larry kudlow. we'll be right back. i'm a conservative investor. i invest in what i know. i turned 65 last week. i'm getting married. planning a life. there are risks, sure. but, there's no reward without it. i want to be prepared for the long haul.

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welcome back to "the kudlow report." monday night on this broadcast i argued that mitt romney's optimistic view of free enterprise growth would win the election. clearly i was wrong and i'm willing to admit it. of course, it was obama who got the 300 electoral votes, not romney. so where did i go wrong? well, here are some thoughts. first, voters still blame george w. bush, not obama, for the economy. and according to exit polls, 40% of voters believe the economy is getting better. plus, and here's where i really missed it, of those who do worry

most about the economy, they split their vote evenly between obama and romney. in fact, the same on budget deficits. mitt romney apparently did not make the sale. now, voters do oppose tax hikes according to these polls and they did trust romney more on keeping taxes down. but interestingly, they trusted obama more in getting unemployment down. and here too mitt romney did not make the economic growth sale. two other quick points. first, romney lost the hispanic point by 40 points. 70-30. devastating. as i have repeatedly said down through the years, if the gop doesn't develop a more compassionate and opportunity-centered immigration policy, it is never going to win another presidential election in my lifetime. and finally, hurricane sandy, a huge october surprise. listen to this. 64% of voters cited it as an important factor with 62% of

that vote going to the president. so like everybody, i congratulate president obama, but i'm going to spend the next few years watching him for free market principles of economic freedom. that's what i try to do to protect this great country of ours. moments ago house speaker john boehner re-elected to a 14th term in congress says he will consider tax increases as part of a zeal to tackle the fiscal cliff. to sort through this cnbc's eamon javers has the very latest. good evening, eamon. >> good evening, larry. in his first post-election televised comments today speaker of the house john boehner telling reporters that he's twoilg accept some increases in revenue as long as they come as part of the grand bargain on taxes and spending in washington that would include entitlement cuts as well as tax reform that would lower overall rates and broaden the base. here's the speaker earlier today. >> for the purposes of forging a bipartisan agreement that begins to solve the problem we're

willing to accept new revenue under the right conditions. what matters is where the increased revenue comes from and what type of reform comes with it. >> meanwhile, on the other side of the capitol building senator harry reid, the democratic leader, also talking to reporters. reid sending a similar kind of conciliatory kind of tone, but reid also said that he doesn't want anyone to think the democrats on capitol hill can be pushed around. >> the election's over, and we have enormous challenges ahead of us. they're right here. and we have to sit down and go to work on it now, not wait. this was really the message the american people sent from all over. >> and larry, we know that president barack obama after his re-election last night reached out to congressional leaders, calling all four of the top democrats and republicans on capitol hill last night and this morning from chicago telling them he's willing to start the work on taxes and the deficit in this country. larry, back to you. >> all right.

many thanks. eamon javers. so when congress gets back to work, are they going to reach common ground? here now we have key house members kevin brady from texas. he's the vice chair of the joint economic committee. and joining us by phone, gregory meeks, democrat of new york. his district, by the way, in the middle of the hurricane sandy zone, and there is a snowstorm out there now. so i appreciate mr. meeks very much. want to go to my friend kevin boehner first, though. did john boehner's speech surprise you? is this a conciliatory message done deliberately and are we going to get off the dime on the fiscal cliff, kevin? >> well, first let me say to greg our prayers are with you. we're in hurricane alley here in texas. we know how devastating these are. so if there's anything we can do to help you in your district, please let us know. secondly, john boehner naid i think exactly the right two points today. one, he said the president doesn't have a mandate to increase taxes. in fact, the strong re-election of a republican house has made

clear the american public doesn't want higher taxes. the second point was the right balance to this fiscal cliff to address this issue is a combination of a stronger economy that generates new revenue through fundamental tax reform as well as spending restraint that includes entitlement reforms. i really think what he said today is exactly where the republican congress is not higher taxes, higher revenue from strong growth. >> gregory meeks, is that where the democratic caucus will be in the house? i know you're in the minority. but you're a vocal minority. you heard kevin brady. what's your take on this new boehner plan? >> i want to first thank kevin because he is my friend for the outreach and the concern he's this for the residents that are really suffering out here on the rockaway peninsula and it's because of sandy. really appreciate it. and we are looking to -- and i'm hopeful. because we must make sure we don't have the fiscal cliff. and that we'll be able to sit

down and negotiate. and i think something in the same vein, a big deal in the name of simpson-bowles. i think the president and the speaker tried to work something out before where there is, you know, additional revenue because i think that's really where it broke down before, where there was a pledge not to do any revenue at all but there has to be some additional revenue to go along with cuts. there have to be both, with both the sacrifices made by everybody. and i think the richest 2% can afford to pay a little more just like we were but we've got to figure it out. i understand about unemployment and entitlement pramds, we need to put everything on the table and figure out how we can work it out for the benefit of the k0ur7b9. >> kevin brady, it sounds like there's two things going on here. short run you've got tax cliff, also the budget sequestration, the across the board budget cuts. longer term it sounds like mr. boehner wants to explore tax reform and entitlement reform and so forth. it's the short term that wall

street is real worried about. today's 300-point sell-off may, kevin, have something to do with that. what happens in the short run? >> yeah, they tie together very well. because obviously extending the current tax relief at the level it is with a guaranteed timetable for fundamental reform next year solves both the short term and the long-term issue. and on sequestration, having a real meaningful authentic spending restraint program that also tackles entitlement, i think that certainty about whether america will get its act together on its financial house, especially addressing social security and medicare, i actually think that will be very good for the market. so this is a chance to make some big changes. >> the markets would love this. but here's my skepticism. do you think this is all going to happen in the next, what, 30, 40, 50 days? that's the part i don't get. something's got to start first and then we go second and then we go third. >> i actually think if you take it one problem at a time it is

doable. i know this. republicans don't believe it's responsible to drive off this fiscal cliff. we think the economy is far too weak, turbulence matters at this point. we really think the common ground, not higher taxes, higher revenue from growth. >> greg meeks -- yes, go ahead, please. >> i want to just say when we looked at the market today primarily it was as a result of what we heard was happening in europe and talking about instability in the german economy. but you have to look at that lesson to know that imbalanced austerity doesn't work. look at the uk, for example. they're kind of in a double different recession after severe austerity. and spain had a 25% unemployment which will only increase as budget cuts kick in. so i think the lesson is that we cannot accomplish deficit reductions and economic growth simply by cutting spending alone. revenue generation is critical and we have to make the appropriate investments in infrastructure and education,

rebuild our country over the long-term as necessary. we should be able to engage in a bipartisan conversation to figure out how we do both. >> greg meeks, before i lose both of you, what i hear you saying is you want to raise tax rates, you want to raise i assume the top tax rates. what i hear from kevin brady is something much different, lower the rates and broaden the base. already we've got a split here. first of all, mr. meeks, do i have your take right? do you want to actually raise tax rates? >> i want the top 2% to pay more. yes. ? and brevin brady, what's your reaction to that? because this has been the split that has divided us for what, 15, 18 months. >> yeah. and that difference is going to continue. we don't think raising taxes and actually harming the economy and paying for less than ten days of spending per year is the right solution. but growth that creates more revenues. we know you can't pay our bills right now at 15% of gdp but we think there's a smart way of a stronger economy that pays our

bills at 18% which actually gets us to what we want. >> taxes would not be raised on 98% of the americans, would not have their taxes raised. >> greg meeks, do you have any sense of where president obama is going to come down? there is a lot of conciliatory activity. right after the election. it started last night. it continued today. where does president obama come down? do you have any sense of that? >> i think we're going to come down close to where we were when he almost had a grand bargain during the summer. we had something close to $4 trillion. i think that the speaker was close to agreement there. and at that time his conference basically told him they couldn't accept the deal. and i think this time with the new election that we'll get closer to having that deal. >> all right. >> i think that's what -- >> absolutely, larry. we saw that much differently than greg does at the time. truth is we were at the able. we hope the president and the

jat will join us afghan we'll stay at the table, get this problem solved. >> greg meeks and kevin brady. i'm grateful. california, another package of tax increases on the wealthy. it's past the voters in california, and it's going to drive more business away from a state that desperately needs help. all that's up next. [ male announcer ] how do you trade?

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california voters are choosing to raise taxes on high-income taxpayers and increase the sales tax in order to fund education and state programs. so they say. last night voters passed proposition 30 with about a 54% majority. the question, is this tax hike going to destroy the california economy? let's bring in willie brown, former mayor of san francisco. mayor brown, thank you for coming back. look, i understand that this is supposed to help education. but a lot of people are saying it's going to go to medical care, health care, prisons. a lot of people say it's going to go to teachers' unions, it's going to go to pensions, it's going to go to other forms of benefits. and willie, you know you're losing business to texas and tennessee and other states. how can you do this? >> well, it's very simple. the state of california, unlike the federal government, we at the state level are in the position where we're trying to do what's right about the state and about the people of the state. and the people bought into it.

the legislature put the measure on the ballot. and with the governor's blessing and with the governor being the architect of it. and then the voters themselves. 54% of the voters in this democracy said good idea. let's move on it. and that is what occurred. and believe me, i don't think it's going to drive any businesses out of the state. >> do you really think -- willie brown, do you really think it's a good idea? i mean, look, first of all, upper-income people have very volatile income, particularly in california. silicon valley, you have a bad year, you lose your income, you never get the sales tax. you never get the income tax. this stuff's been tried again time and time again. i understand that it passed. what i'm asking you is what makes you think this time it's going to actually succeed? >> well, i think it's going to succeed because the people blessed it. you have not had a direct blessing by the people. the people said yes, i'm willing to pay more to do the things that need to be done. you see we had on the table a huge number of cuts if this

measure did not pass and the cuts were already in place. they were going to be automatic. as of today you would be discussing programs you're backing out of. universities, sections that you'd be closing. schools that you would be in fact shutting down. stopping the number of days you have for schools. >> how about pension financing? how about health care financing? all of which is in virtually a state of long-run bankruptcy. is any of this money going to go to those benefits? >> i would suggest to you that it probably would not. and it would not because there are priorities. certainly, with 2/3 of the legislature now prepared in both houses and the governor to deal intelligently with the pension issues, to deal intelligently with all the other issues existing in the state, i suggest to you that there's going to be the same process that when reagan was governor, when deukmejian was governor, and when wilson was governor, all three republican governors, each

of them did something similar in order to get the state of california in sound financial shape. and it was in sound financial shape until we in an idiotic way got rid of the tax on automobiles. when we did that, we hurt ourselves. >> all right. molly munger, proposition 38, that one lost. i kind of read that, okay, californians are split. they did vote in one tax hike. they did vote out another tax hike. how long do you think that political game's going to work? >> well, i don't think miss munger will be coming back. she only got 28% of the vote. 72% of the people said no to munger. now, as a lawyer i'd really love to represent her because i think the people who guided her campaign may not have done the professional job that they need to do and she may have a good claim against them, not unlike what happened with meg whitman when she ran against jerry brown. but these are all practical things.

clearly, the voters said we don't like the idea of dedicating all this money just to schools. we believe you legislators should be in a flexible position when it comes to this money that you are asking us to put on the table. >> mayor brown, do you really seriously believe, do you believe that this is just going to be a temporary tax? do you really believe that? >> it is not a temporary tax. it has a stated, designated date. there is a time period. >> right. >> four years, five years, and it's gone. and that's it. resurrect it it's gone.ote to so it's not a temporary -- it's not one of these deals where we have to re-up it. it's already dead. it has a sunset. >> thank you very much, former mayor willie brown. we appreciate, it sir. thanks for walking us through. >> thank you. nice to be with you. >> coming up, bipartisan optimism. oh, my goodness. both sides are showing signs of budging. they're committed to finding common sense common ground here. we want to grow the economy. stay with us. adding insult to injury, by the

way, there's a nor'easter that's pounding the coast right now. we're going to have to track that storm when we come back as well. frank, instead of scratching your way to retirement, get on e-trade. set up a real plan. frank! oh wow, you didn't win? i wanna show you something... it's my shocked face. [ gasps ] [ male announcer ] get a retirement plan that works... at e-trade.

welcome back to "the kudlow report." i'm larry kudlow. in this half hour, what does business, and i mean big business, what do they want to come out of this election? the business round table. i'm going to ask john engler, former governor of michigan. and if i ever want to see another republican presidential win in my lifetime, then the gop is going to have to soften a key area. immigration. it was a catastrophe last night. i'm going to talk with republican strategist sarah fagan how to fix it. with much of the northeast still feeling the devastation of hurricane sandy, we are now being pounded by a nor'easter. many of the very same areas battered by sandy are getting hit again. meteorologist todd gross is track the storm for us. good evening, todd. >> good evening, larry. and this one actually has a name. is named by the weather channel. it's winter storm athena. and the heaviest snow from this storm, and yes, i did say snow

and not rain-s from waterbury, connecticut southward all the way to the suburbs of atlantic city. just west of atlantic city all the way through new york. now, the new york metro area is getting hit extremely hard this evening. it's like a blizzard outside. and that is a big problem. let me show you why by taking a look at some video that i actually shot just prior to sunset. it's the trees. the snow on the leaves of course brings down branches and renews all over again in terms of the power outages. let's look at other factors, a list of things to worry about with this particular storm. it's the wet snow and damaging -- that damages the trees. it's the numerous power outages as a result. it's four to eight inches of snow, which is holding up travel as well. and that's complicating the whole gas shortage situation. and cape cod and the islands, you know what they're getting? they're getting winds to 70 miles an hour this evening and some big waves as well. it won't be until tomorrow that we have a better idea of the economic impact from this winter

storm. which is wreaking havoc right now across the northeast. although it will let up toward dawn. larry? >> thank you very much. todd gross, we appreciate it. now, let's listen to a short bite from president obama's victory speech last evening. >> and in the coming weeks and months i am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together. reducing our deficit, reforming our tax code, fixing our immigration system. freeing ourselves from foreign oil. we've got more work to do. >> all right. it's good stuff. my take, to solve our fiscal woes we've got to find some common ground to get there. but the key is finding common ground that won't wreck the economy. the question is can they get it done? we have cnbc contributor jared bernstein, former joe biden chief economist. we've got steve moore of the "wall street journal" editorial

board, and dick armey, former republican house majority leader and now freedomworks chairman. dick armey, it was jared bernstein who drew my atext tension to this in our long session last night. i'm going to read it from the president's speech. "reducing our deficit, reforming our tax code, fixing immigration, and freeing ourselves from foreign oil." now, dick armey, if president obama wants to go down that road, i would support him, wouldn't you? >> certainly they're laudable objectives. and if the president can make the intellectual connection between reforming the tax code and increasing revenue, he can then have the policies from which he can get the growth that will create the jobs. so it seems to me the president is announcing perhaps a new level of understanding and maybe one that's born out of some separation from the need to appease his base. >> he's been tutored by jared bernstein. jared bernstein, did you put him up to that? actually, i'm going to take credit for it, jared.

>> i very much like where you're going today with your common sense. look, i just heard dick armey talk about increased revenues. i heard john boehner talk about that earlier today. certainly the president has consistently stressed that point. look, i feel like there is a pinprick of light here, and i know we can argue about how get there, whether it's broader base, higher rates, and clearly the president is on a different side than you guys. but that ought to be something we can sit down at the table and hammer out. >> steve moore, let me go to you on this. first of all, get your take on what president obama said. very interesting he said that. second of all you've got speaker john boehner being very conciliatory. but third of all, steve, i still don't hear anybody talking about cutting spending. i never hear about spending cuts. what's your take? >> i like the idea of the fiscal cliff. i think we should do the sequester. but i think the failure of barack obama's first term was that he tried to do everything with only democratic votes. you know, he tried to pass the -- he passed the stimulus with only democratic votes, the big health care bill with democratic votes, and it was incredibly polarizing.

i hope that barack obama is being sincere when he says i want to do these things in a bipartisan fashion. and to my friend jared bernstein i'd simply say this -- that it's a non-starter for republicans. it's the tripwire here is to say raise tax rates because you're not going to get republican votes for that. so why not find another way to do it? >> so i think that's a fair point. and i actually am extremely exhausted of continually arguing about these, you know, few percentage points of marginal tax. so -- >> so we all agree. >> so i guess what i'd ask from you guys, though, and for the congressmen and for steve and larry, you know, give us specific base broadeners. this can't be a mitt romney, asterisk here, we'll tell you later. tell us, if you can tell me right nows if you have some ideas, what are the base broadeners that you have in mind. >> what's wrong with what mitt romney came up with? was setting a cap. you can set the number. i'd accept any number you like. but it's the rich people who

take all the deductions and if you do that i think it's a very progressive way of handling it. >> let me get dick armey back in here. >> let me say once again, tax reform is the key here. and remember, you've got to make an intellectual separation and differentiation between increasing revenues through growth in the economy that comes from a smart and encouraging tax reductions and increasing taxes because you think that voting is the best way to get revenge. this ain't about getting even. it's not about fairness. it's not about revenge. it's about how do you have smart growth in the economy that fulfills the twofold objectives of increasing the revenue, increasing the employment, and that coupled with what of course we do need something, serious sizable reductions in the size of government by at least 2%. >> that's what we never got. >> of -- >> but i've got to ask you, dick armey, i've just got to ask you this.speaker boehner, what john

boehner laid out is where they were in jun, july, august 2011. they were so close to a deal. the woodward book blamed the president for raising revenues at the last minute and that that killed the deal. dick, what does it take from start to finish? you've been through this process during the clinton years. how do you get past? it ended in 2011. why is it going to do any better in 2012 or 2013? >> well, i do think the president seems like he's ready to go to work on this. to sit down at the table. and one of the things i found was absolutely essentially when we did this with president clinton, you've got to be able to sit down, negotiate, and then have a realistic understanding. when you say i can't take this configuration back and pass it in my body, people have to understand, let's reconfigure it now rather than try to sell what's not sellable back to the body and alienating people with

suspicions -- that realistic understanding of who your -- >> can i mention something quickly? >> on the deductions, the thing that steve mentioned earlier, i think there's an interesting point. i'd like to hear steve respond to this. we actually did have a deduction cap. in fact, it's still in the president's budget. it raises $500 billion over ten years. and it caps deductions at 28%. is that something you would support? >> i didn't have a big problem with, that jared. i thought it was kind of a clever idea. >> that's in the president's budget. >> tough a progressive tax system the rich get actually bigger benefits from the write-offs than the middle income people. that's a negotiable item -- >> we found some common ground. >> one more point -- >> let me just quickly remind everybody, we've all known the correct right answer since 1984 is the flat tax, which goes -- >> if we could get barack obama to do that it would be a great word. >> what about last one, jared has reminded me time and again

that president obama is for corporate tax reform. >> 28%. >> some people think that would be the single best economic stimulus there is. i want to get some quick takes on this. go around. steve moore, you first. corporate tax reform. >> it's a no-brainer. if we bring that rate at least down to 25% to 30%, i'm in favor of getting rid of a lost loopholes on the corporate side and i had i it will raise revenue. >> and dick armey, i assume you have the same point of view. >> absolutely. to start with, the most asinine of all, the corporate sops for ethanol. >> get rid of the ethanol. you'll aim sayii'm saying -- >> can i finish up, larry? john boehner increased revenue. dick armey increased revenue. maybe i'm dreaming or there is some common ground. >> but you've got to take higher tax rates off the table, jared. >> i'm trying to set this up. >> higher tax rates or do you want increased revenue? because you can't have both. >> i'm just showing you --

>> president did just win an election on that issue. >> there are things on the table. there is common ground. as dick armey said, if you can't get it you've got to reconfigure. >> that's right. >> but it is possible to do this. i think americans want to see it done. >> we just did it right here. this is a first on kudlow. >> jared bernstein, thank you very much. steve moore, thanks. and dick armey, we appreciate it. coming up on "kudlow," obama hit historic highs with latinos last night. he won 71%. the election shows there is a demographic sea change happening and too many republicans do not see it culminating. that that's coming up next.

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percentage point spread, right there that could have been the election. particularly when you get to key battleground states. if republicans don't change this, they're never going to win a national election. >> they're never going to win a national election and we're never going to have a governing majority ever in this country. you're right, larry, this is a real challenge for the party. and one of the benefits of losing by such a large margin is i think people will finally stop and focus on the fact we have to do something about it. we have known this is a problem for many years. people have been talking about it. but i think you'll start to see action. >> but the language is too harsh. the border language is -- everybody wants borders. that's fine. i don't know. cops going after them may be too hard. the fact is obama had some good points on his dream act. if the family comes here and the kid wants to go to school, why shouldn't he go to school? romney went after governor perry in the early debates. in other words, step by step, sara, you could see this thing

developing until it became a horror show last night. by itself it could have changed the election. >> romney clearly was never comfortable on this issue. and that shone through on two levels. one, you were wrong on the position. and two, they looked at you like you were insincere, these voters. and that was a problem for romney. but here's the good news for republicans, larry. ted cruz, marco rubio, suzanna martinez. we've got a great bench of leaders who are hispanic who can go out and lead on this sxish articulate on behalf of the party and we've got it take advantage of that strength. >> and conservatives in the party have got to understand that there will be no conservative governance if they don't develop some sensible immigration policy. i love the ted krus idea. i love the marco rubio idea. but the conservatives -- i'm a conservative. you're a conservative. but you've got to have a head on your shoulders. >> you're right. we have a great opportunity to talk not only about immigration

reform but the economy. keep in mind, many of these new americans, they're last in the economy and they're first out. so it wasn't just immigration they were voting on last night. >> i've got to go. i'm sorry we don't have more time. i'm a conservative. you're a conservative. there's a conservative message for hispanic voters, for heaven's sakes. >> that's right. >> if we discover it. sara fagen, thank you very much. we appreciate it. coming up, the election's behind us. now it's time to focus on recovery. what are american business leaders saying? what do they want from the president and the congress? coming up next. when you take a closer look...

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welcome back to "the kudlow report." so american businesses ready to say good-bye to policy gridlock and economic stagnation and roll up sleeves, make 2013 a better year for the u.s. economy. they're urging congress and the white house to do the same. well, let's talk to john engler, president of the business round table, former republican of michigan. governor. so john, elections matter. you know that. there's already been some degree of cooperation in the last 24 hours. the president called the leaders. mr. boehner reciprocated, said maybe we can make a deal. what do you think's going on here? >> well, i hope it is a thaw that's going to result in some significant progress. we're way behind in terms of work that just needs to be done. i mean, provisions in the tax law that if expired will be going on almost a year now. more at the end of this year. so this short-term fiscal cliff

has to be gotten out of the way. that's just noise. and then we need to get serious on the long-term fiscal strategy, which includes economic growth, comprehensive tax reform, and entitlement reform. those three are all i think integral parts of a plan that would see america and our economy actually leading the world recovery. >> well, president -- all right. let me ask you this. i'll do it differently. the president calling john boehner last night according to reports and boehner reciprocat reciprocated. if the president calls you, what would the one thing you'd say to him, what would the one proposal be, john engler? >> i'd say start bringing those proposals in. mr. president, you just won a mandate in the lerks you've got the majority in the washington government. you've got to sit down with senator reid. let's start passing things out of the senate. and the house will have an obligation to respond. >> the first thing. what would you say to him? what's the first number one sning. >> we're in a lame duck session. let's get the debt ceiling taken care of. let's get probably all the taxes

extended through 2013. let's not fool around with them. just extend them all. and let's get this sequestration and no doubt there's going to be aid for hurricane sandy and some of that that will all get wrapped into that budget deal. do the russian pntr. and then go home. >> he says he wants corporate tax reform. in fact, he says he wants overall tax reform. it was in his speech last night. >> i'm glad that he does. he's actually talked about it. i think the rate's a little high. i think the proposal can be a bit more aggressive. we are way behind competitively on an international basis. that needs to be done. but we understand now we're at the point with all these other rates expiring that you're going to have to make sure that you don't hit the small and medium-size unincorporated businesses. they're big job creators, too. and they're part of the supply chain of the global companies that i work with. >> i've got to jump back. >> you've got to take care of all of it. >> i've got to jump out. much more to do. i'm sorry, john engler. wish we had more time. that's it for this evening's

show. we always need more time. thanks for watching. american corporations have a lot more to do, and maybe the president's going to do it. who knows? i'm going to keep an open mind and an optimistic point of view. i'm larry kudlow. see you tomorrow night. ♪ [ male announcer ] a european-inspired suspension, but not from germany. ♪ a powerful, fuel-efficient engine, but it's not from japan. ♪ it's a car like no other... inspired by a place like no other. introducing the all-new 2013 chevrolet malibu,

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